The deal, and the ripples it creates in the sector, was the
buzz of the consumer industry's annual get-together in Florida
this week, sponsored by the Consumer Analyst Group of New York.

In private discussions overlooking a yacht-filled marina or
in the hallway between the Nespresso table and the Coca-Cola
Freestyle machine, the consensus among executives, analysts and
investors was clear: gear up for a new era of belt-tightening,
if not more acquisitions and divestitures, in the sector.

"This is the first large deal in years by a financial buyer
that calls out the lackluster fundamentals in the U.S. packaged
food space," said Robert Dickerson, an analyst with boutique
firm Consumer Edge Research.

Industry veterans are already beset by anemic sales growth
and margin pressure, thanks to weak economies in Europe and the
United States, changing consumer demographics, volatile
commodity costs and competition from lower-cost rivals.

Some of the principals of 3G Capital, Buffett's partner in
the Heinz deal, were also behind the rise of AmBev, a Brazilian
brewer, into the world's largest beer maker, Anheuser Busch
InBev. Expansion and cost-cutting were hallmarks of
their strategy, and the industry expects it to be the same here.

It is unclear what, if any, other targets 3G might have in
mind. Campbell Soup has long been seen as a good candidate,
though roughly half of its stock is controlled by heirs of John
Dorrance, who invented condensed soup.

Campbell Soup Chief Executive Denise Morrison
declined to comment on a potential merger with Heinz, but she
did say the news put her on guard.

"For me, it's a heightened signal that I've got to be even
more aggressive about costs," she said in an interview.
"Campbell is always looking for ways to create better
productivity and I think this is a good call to action."

Campbell has already been cutting costs, including by
closing factories, as it works to turn around its sagging U.S.
soup business.

WHAT'S NEXT?

Given its news, Heinz canceled its presentation at the
annual conference. But that did not stop the chatter.

"Any time there's a deal, everybody wonders if it's a
catalyst to other deals and that remains to be seen," said Irene
Rosenfeld, CEO of Mondelez International, who last year
oversaw the spin-off of Kraft Foods Group. She told
Reuters that companies with "good strategic planning" pay more
attention to their own circumstances than what happens outside.

ConAgra Foods Inc CEO Gary Rodkin, who just acquired
private label food maker Ralcorp, said deal momentum could now
pick up, if 3G buys more companies or if other companies get
inspired by the Heinz deal.

"It just could be the mentality is, 'that's how we're going
to create more shareholder value in this industry'," Rodkin said
in an interview.

There has already been a wave of much smaller transactions
in the food industry, with the split ups of Sara Lee into
Hillshire Brands and D.E. Master Blenders,
Kraft into Kraft Foods Group and Mondelez International, and
Fortune Brands into Fortune Brands Home & Security and
Beam Inc.

In addition, there was Canada's Saputo buying
Morningstar from Dean Foods and Kellogg buying
Pringles from Procter & Gamble.

Packaged food is a "business that rearranges the furniture a
lot," said Campbell's Morrison. Many other top executives at the
conference, including Hillshire's Sean Connolly and Clorox Co's
Don Knauss said they were open to "bolt-on"
acquisitions.

SPIN-OFFS STARTING

Late on Thursday, Heinz reported third-quarter earnings and
said it would divest Shanghai LongFong Foods, a frozen food
business in China. It said it anticipates securing a deal with a
suitable buyer in the next 12 months.

Analysts said other divestitures could follow, as 3G reviews
the Heinz portfolio which spans Ore-Ida frozen potatoes to baked
beans.

"It seems equally likely that this could spur divestitures
as well as acquisitions," said Moody's analyst Brian Weddington.
He said other frozen food businesses, which include Smart Ones
frozen entrees, might be candidates, since they have been
challenging for Heinz.

But one issue that could stand in the way of more merger
activity is the high asset prices sellers are seeking, since
cheap financing tends to lead to lofty valuations, said General
Mills Chief Financial Officer Don Mulligan.

"We've seen that both for brands we looked at in the U.S.
and in emerging markets," Mulligan said. "There's a lot more
reasons deals can fail than they succeed."

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